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An investor can invest in an option where there is a 65% chance of making a profit of $60,000 but a 35% chance of making
An investor can invest in an option where there is a 65% chance of making a profit of $60,000 but a 35% chance of making a loss of $30,000.
a) Let X represent profit. Create a discrete probability distribution for profit.
b) Find the expected value of profit.
c) Calculate the standard deviation of profit.
d) Is buying this option a good idea? Briefly explain.
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